IPO / M&A

Following the onset of the COVID-19 pandemic, historically low interest rates created a very margin-friendly environment for mortgage professionals. This set the stage for a record-setting year for mortgage companies and originators across the board, as well as an ideal opportunity for companies in the mortgage industry to go public. 

According to the Mortgage Bankers Association, mortgage lenders collectively originated a record $3.69 trillion in mortgages in 2020 – a number that declined in 2021 and is expected to continue its downward trend. Similarly, lenders’ profit margins have also steeply declined, which has contributed to decreased stock prices, and, potentially, a decrease in the overall financial strength of many companies. Some companies have combatted this trend with layoffs, MSR sales and other strategic moves.

Another result of the decreasing profit margins has been increased M&A activity. Upwards of 40 deals have closed in 2021, topping 2018, which had been the biggest M&A year in recent history with 33 deals.

One cause for concern, as it pertains to attrition-based M&A, is the wholesale channel, where three lenders – UWM, Rocket Pro TPO and Homepoint – collectively make up nearly 50% of wholesale market share. As the “big three” continue efforts to grow their own market share, that leaves less business for the several remaining wholesale lenders, leading to further attrition. As more wholesale lenders close their doors or are purchased by others, that lessens the inherent advantage that mortgage brokers possess.